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11 Comments

Troy

ansonburlingame

Anyone that pays attention to macro economics knows the shape of such graphs today in America, sort of. But…….

I wonder if that graph takes into account the “wealth” of those far to the left gained from current entitlements alone, local, state and federal entitlements. A “man” earning say $10,000 a year thru “working” receives many “benefits” to agument such low income. Is that “wealth from entitlements” included in the graph and as well is the top 10% of “wealth” before or after taxes on an annual basis as well? I don’t know, but sure do “suspect” such skewed numbers on a politically motivated graph.

Actually, I wish I knew more about this subject of income distribution in America. As you know I put forth the effort to study, in a college course, macro economics for a semester. Not ONCE was income distribution included in that course of instruction including what it really is and what effects government programs might or might not have on it.

I raised that issue with the President of MSSU, the Dean of the Business school and my own professor and all agree more should be said in such a course. But for now, I have no academic or intellectual basis to even begin to understand WHY that graph as presented is the way it is or even more important WHAT should be done about it, by government, etc.

I do know this from history however. In 1788 ALL taxation to support the French government, the monarchy and its armies, came from ONLY the Third Estate, the common people. The nobility and clergy paid ZERO taxes for the country.

Today the American clergy STILL pays zero in taxes (by clergy I mean churches, not individual ministers, etc.) but the “nobility” in America pay 75% of all the federal income taxes and the bottom 50% pay zero income taxes, the principle source of money for the federal government. But of course you have heard that before for today in America but may not know the history in France in 1788, just before the Revolution when heads started to roll.

If liberals could somehow gain the upper hand and get the top 10% to pay 90% or even 100% of federal income taxes, I wonder how the shape of the above curve would change. My guess is not by very much as the money would “fly” out of the country.

When that began to happen (actually it already IS happening) then laws could be passed to outlaw the flight of such money, out of the country. Next step, PEOPLE, rich people, will get on airplanes and do their own flying, out of the country. And as Reich suggests we can replace them with immigrants, who will be in the bottom 50% and STILL pay no federal income taxes as well. Then what?

Bottom line Duane, I am unaware of any effective manner for government to do much at all about the curve you post nor do I accept the full “truth” behind that curve. I simply don’t know enough about the whole issue of income distribution, anywhere, to understand an effective manner to control it. Historically however, I have read of some real disasters that have happened around the world throughout history when governments step in with too much force as well.

As only an example, Hitler claimed the Jews had too much money in post WWI Germany and look what happened. And by and large the German people went right along with him, for a while. Then we could move east to Russia or farther east to China and watch how income distribution was handled therein as well, for a while.

ansonburlingame

I appologize, in advance, for the length of the above and this “extra” reply. But I do have another real question, a fundamental one.

The video claims $54 Trillion last year in American wealth. But our traditional manner in deciding financial issues within America is GDP which is only about $15 Trillion (plus or minus a little)

We current spend, by the federal government, some 25% of GDP but obviously it is only about (3.5/54) 6.4% of total wealth. Seems like we could spend a helluva lot more by the federal government if only it could tax that total wealth, right??

The total net worth for U.S. households was around $65 trillion at the end of the third quarter of 2012 (as far as I could find). The current numbers for 2012 GDP are just less than $16 trillion.

As far as federal spending as a % of GDP, it was just below 23% in 2012, not 25%. For 2013, spending is around $3.8 trillion, which is about 5.9% of total wealth. So, if we wanted to get our priorities straight, we would, yes, find a way to tax more of the total wealth in this country. But, of course, the politics, at least right now with the Tea Party disproportionately taking up seats in Congress, won’t permit such a thing to happen. Just more deficits, that’s all.

Jane Reaction

Excellent, accurate graphic. Isn’t it frightening how little Americans know? For example, the commenter tried to compare GDP, which is measured by current production, to total wealth. Not only are they different animals, but for the majority of Americans GDP growth is what keeps us going, since the wealthy have already looted our assets, as can be easily seen.

henrygmorgan

First, the President of MSSU is, like me, an English major. I’m not surprised that he had no answers for you. But to the point, I am amazed at the numerous statements of ignorance of the subject you express in your post: “Actually, I wish I knew more about the subject of income distribution in America.” “But for now I have no academic or intellectual basis to even understand WHY that graph as presented is the way it is or even WHAT should be done about it, by government, etc.” “I simply don’t know enough about the whole issue of income distribution, anywhere, to understand an effective manner to control.”

With all due respect, and I do mean that, I would think that you would have a good deal more reluctance to comment on a topic about which you admit you have so little knowledge. I mentioned to you in an earlier discussion that there is no one absolute theory of economics, that economists disagree on economic theory, a fact represented by the differences in the. political theories of Milton Friedman and Paul Krugman, even though both are highly respected Nobel Prize winners. Listening to the recent Joe Scarborough – Paul Krugman debate on Charlie Rose is a very good example. Just my opinion.

That Scarborough-Krugman debate could have been so educational, except Scarborough wasn’t interested in anything but degrading Krugman, and Krugman, being by temperament an academic, doesn’t really know how to mud wrestle on that level. I suggest Krugman watch a little more Morning Joe and see how Joe operates (bullying,interrupting etc.) and then ask for a rematch.

Is there any more detail on these graphic were derived? In general I think wealth is pretty concentrated, but I suspect this might wealth measured as value of equities held, bonds, cash, near cash assets and other financial wealth. I think if you add in the value of homes, small business (I know this is a conservative cliche), antos, and other non-financial wealth I think the distribution would look flatter. It would still be pretty skewed though.

Honestly, I can live with the rich being rich and getting richer. The middle and lower class being flatlined or losing not just relatively, but absolutely is the much bigger concern and unacceptable.

I have none of the methodological details, and I have seen three or four attempts at this that arrive at roughly the same place. “It would still be pretty skewed though,” is the point, Bruce, no matter the technicalities involved in defining wealth.

Your last point intrigues me: “I can live with the rich being rich and getting richer,” as long as the middle and lower classes are not losing both relatively and absolutely. Do you not see a negative correlation between the two?

ansonburlingame

Henry, I readily admit that I understand very little about the dynamics of income distribution in America. But I also refuse to “sit still” and let one graph convince me that it is a disaster in the making as well. And even if the graph was absolute truth, what can and should be done about it becomes the question.

Just an example above. The author of the graph stated “wealth” was $54 Trillion yet Duane found another source stating it was $65 Trillion, in a given year. I wonder if Romney’s $250 Million stashed “somewhere” is part of that variable figure? The point of course is Romney only pays taxes on that money when it is withdrawn in a given year and “comes into America” to be used. But no taxes on the principle “stash” each year. Duane suggests that we ought to find a way to tax the principle, I suppose.

OK, how would anyone go about doing so? If I have equity in my home, should that be taxed each year as well, or my personal property equity if I had a car that was paid off? Actually that value of my home IS taxed each year to a degree thru property taxes. But I also noted my taxes on my home did not go down when the market value of the home plummeted in 2008 and onward. Did yours?

Another example. There is HUGE “wealth” in the stock market. Add up ALL the stocks listed on just the NY stock exchange and multiply each total shares of a given stock by its current price. Again a huge figure. Does anyone think we should seek a way to tax that wealth just “sitting there” each year and growing each year due to both inflation and hopefully some “real” financial growth as well?

Here is yet another example. The NYSE value is a record high right now, yet most say our economy is still struggling to recover from the GR. Why is that I wonder? It amazes me that people still buy, say Apple, at a very high price today (yet about 30% lower than its peak a couple of years ago). To me that is gambling, betting on the “come” so to speak.

I “think” the secret of American prosperity is a vibrant middle class based on history. I would love to see the curve above flattened out, for sure. But I simply have no idea how to go about doing so with government policies. However instinctively, and certainly NOT with any academic or intellectual basis, I see no way to rob Peter to pay Paul and successfully do so, on a macroscopic scale.

As for American wealth, look how it went up and down during the 1920’s, a roller coaster for sure until 1929. I wonder what the “income distribution curve” looked like in say 1928 and then in 1933, as just an example. My guess is the whole curve went down, drastically. But I wonder if the shape of the two curves changed very much. I just don’t know, but still wonder.

Consider this “magic solution”. Our “wealth” is $65 Trillion and we have 320 Million people in America. Redistribute “that” and every soul in America would be “worth” $203,000 at the “moment of magic redistribution”. How long would it remaind that way and would such redistribution be “good for America”?

Michael D. Gaden, BSNE, MBA

I think that the problem is not so much the current distribution of wealth (although I do see that as inequitable), but what the skewness of the curve protends for the future. It is fairly easy to see that as any given entity (person or corporation) gains wealth, then that entity has more opportunity to gain still more, assuming reasonably soiund decision-making. More wealth could assure sonund decision-making because you can pay for it, or input about it.

Is there a point where a “run-away” distribution of wealth occurs, wherein the middle class rapidly (and irreversibly) gets smaller and smaller, and the wealthy accumulate more and more? (Prompt critical, for you nukes.) If so, how close to that point are we, or are we already into it? What happens then?

And, as has been mentioned before, what can we do about it. if anything?